U.S. Supreme Court Atchison, T. & S.F. Ry. Co. v. United States, 232 U.S. 199 (1914)
Atchison, Topeka & Santa Fe Railway
Company v. United States
Argued December 1, 2, 1913
Decided January 26, 1914
232 U.S. 199
APPEAL FROM THE UNITED STATES COMMERCE COURT
Whatever transportation service or facility the law requires the carriers to supply they have the right to furnish.
Under § 15 of the Act to Regulate Commerce, as amended by the Hepburn Act, the carrier has not only the duty, but the right, to furnish all ice needed in refrigeration.
A carrier cannot be compelled to keep facilities for the benefit of shippers and the shippers allowed to furnish these facilities themselves.
The carrier cannot compel a shipper of fruit to have it refrigerated.
When ice is actually needed and used in transportation of fruit, it depends upon the circumstances of each case whether the icing is a part of preparation which can be done by the shipper or part of refrigeration which the carrier has the exclusive right to furnish.
Neither the carrier nor the shipper can insist upon wasteful or expensive service in transportation for which the consumer must ultimately pay. In this regard, the court will consider the interests of the public.
Loading the car, by whomsoever done, must be such as to prepare the freight for shipment, and a consignor may, in the absence of a regularly filed tariff covering this work, not only put perishable freight, such as fruit, in a car placed at his warehouse, but may do all other acts, including icing, necessary to fit the fruit for shipment and filling bunkers in the car with ice for its preservation.
Filing a tariff withdrawing a privilege to shippers affects a practice and a rule within the meaning of the Act to Regulate Commerce, and the Commission has power under § 15, as amended by the Hepburn Act, to determine after a hearing whether the new rate is unreasonable, and if so what is just, and require the carrier to conform to the rates and practice prescribed by it.
An order of the Commission fixing carload rates apparently excluding any compensation for hauling the ice necessary for refrigerating is not confiscatory when it appears that the rate for the fruit itself practically includes the rate for the ice.
In a suit based entirely on reasonableness of carload rates, the issue of whether it discriminates against shippers of small lots will not be
considered when that issue is not presented on any assignment of error in this Court.
What are proper rates for transportation and fair charges for facilities furnished and services rendered, and differences between carload and less than carload lots, are all ratemaking matter committed to the Commission and within its discretion.
The courts have no power to fix rates or establish practices, and cannot interfere with those fixed and established by the Commission except in cases where the orders are void. Interstate Commerce Commission v. Un. Pac. R. Co., 222 U. S. 547 .
204 F. 647 affirmed.
In 1909, associations representing California fruit growers filed with the Commerce Commission complaints against numerous railroad companies attacking the freight and refrigeration charges on citrus fruit shipped from California to Eastern points. Much testimony was taken, from which it appeared that the orange crop amounted to about 50,000 cars per annum, of which the 20,000 shipped in warm weather required some form of refrigeration in order to keep the fruit in condition for use at the end of the journey. At the close of the first hearing, June 11, 1910, the Commission held (19 I.C.C. 148) that $1.15 per cwt. was a reasonable freight rate on oranges. Other questions in the case were postponed until January 14, 1911, when the Commission made a report (20 I.C.C. 106) as to the reasonableness of the carriers' charges of $62.50 per car for refrigeration and $30 for services in shipments pre-cooled by the consignor.
The Commission found that, in refrigeration by the carriers, they furnished all the ice and performed all of the services, including reicing en route. It found that there was a total of about 11 tons of ice furnished, but, owing to the melting, the average weight of the ice hauled was 8,000 lbs., the freight on which to Chicago was $.25 per 100. It cost something to repair the bunkers, and the Commission recognized the right to include an additional sum to cover risk and profit.
The total revenue of $345.30 from such shipments was made up of the following items:
Freight on 27,200 lbs. of oranges at $1.15. $312.80
Cost of 11 tons of ice. . . . . . . . . . . $30.00
Freight on 8,000 lbs. average weight of
ice hauled at $.25. . . . . . . . . . . . 20.00
Damage to bunkers . . . . . . . . . . . . . 5.00
Sum to cover risk and profit. . . . . . . . 7.50
Gross receipts. . . . . . . . . . . . . . . $375.30
Less cost of ice. . . . . . . . . . . . . . 30.00
Freight and refrigeration charges $345.30
The Commission found that the charge of $62.50 for refrigeration services was reasonable.
It further appeared that the government had conducted certain experiments with a view of determining whether an advantage would not be derived from pre-cooling the fruit before the bunkers were filled with ice. There was testimony that the carriers had reached the conclusion that, if the fruit was pre-cooled before the movement of the car began, there would be a corresponding saving in the amount of ice needed in the bunkers. They accordingly had erected plants at which the fruit could be pre-cooled, and included such pre-cooling service in the regular refrigeration charge of $62.50.
Certain shippers claimed that better results were obtained where the fruit was pre-cooled immediately after it was taken from the grove and before it was placed in the car. They therefore adopted a method in which the shipper chills the fruit, cools the car, furnishes the ice, and fills the bunkers at a cost to himself of $32.50. The carrier, for its services in connection with hauling such pre-cooled shipment, charged $30, intending thereby to make the rates on
pre-cooled fruits the same, whether the pre-cooling was by the shipper or the carrier. In determining whether this $30 was a reasonable charge for service rendered by the carrier in hauling fruit pre-cooled by the shipper, the Commission said (20 I.C.C. 120) that no reicing was necessary en route, and that
"it would be a liberal estimate to put the average weight of ice during the entire journey at 5,000 lbs. For the hauling of this ice, the carriers are entitled to fair compensation, as they are in the case of standard refrigeration."
There is also an
"expense in providing and keeping in repair the ice bunkers. . . . The carrier is therefore entitled to this additional cost, which is about $5 per car per trip one way."
Where the fruit is pre-cooled by the shipper, the boxes are packed so much closer together that the load is one sixth greater than in case of shipments pre-cooled and refrigerated by the carrier. The result is that the revenue from a car of fruit pre-cooled by the shipper would be
Freight on 33,000 lbs. of oranges at $1.15 . . . . . . . . $379.50
Freight on 5,000 lbs. of ice at 25 cents per hundred . . . 12.50
Damages to bunkers (and profit allowed?) . . . . . . . . . 7.50
or $54 more than the revenue of $345.30 from a car pre-cooled and refrigerated by the carrier.
The Commission further said:
"As bearing upon the reasonableness of the rate, the carriers showed the cost of the movement of these oranges per gross ton -- that is, per ton of combined weight of car and of contents, as compared with other articles -- claiming that this was the true basis upon which to fix rates. So treating these pre-cooled shipments, it will be found that the carrier receives more per gross ton for handling the pre-cooled car than for either the ventilated or the refrigerated shipment. By every canon of ratemaking which has been applied by carriers in the past, or which is relied upon by them now,
these pre-cooled shipments at the standard rate, without additional compensation, are better business than either the ventilated or the refrigerated movement. Clearly, these growers who have devised and perfected this system of shipment should not be compelled to pay for the privilege of using it more than the fair cost to the carrier of providing the additional facilities which are not included in the ventilated rate, with a fair profit."
The report concluded as follows:
"We are of the opinion that the pre-cooling charge of $30 per car is unreasonable, and that this charge should not exceed $7.50 per car, . . . but the defendants may, as a condition of making this charge, require that pre-cooled cars be loaded seven tiers wide and two tiers high, and may provide by their tariffs a proper minimum to accomplish this result, the amount of which would depend upon the length of the car."
20 I.C.C. 121, 123.
The carriers, in obedience to this order, put in a tariff of $7.50 for pre-cooling services, but at once filed another tariff, effective July, 1911, reciting that
"the privilege heretofore permitted to shippers of citrus fruit to pre-ice carload shipments is withdrawn, the carriers retaining and exercising the exclusive right and control of furnishing and doing all icing and refrigeration of citrus fruit in all cases where shipper does not specifically request or direct shipments to move solely under ventilation."
Immediately thereafter, the orange-growers associations filed proceedings to cancel this withdrawal tariff, and to compel the carriers to continue to extend to shippers the old privilege of pre-cooling at the new rate of $7.50. At the hearing, the evidence and report of the Commission in the former case were stipulated into the record, and, on April 8, 1912 (23 I.C.C. 267, 271), the Commission held that the shippers had the right to the pre-cooling
privilege, and again ruled that $7.50 was a reasonable charge for the services rendered by the carriers.
The railroad companies then filed a petition in the Commerce Court attacking the original order of January 14, 1911 (fixing $7.50 as a reasonable charge on pre-cooled shipments), and the last order of April 8, 1912 (requiring the roads to permit pre-cooled shipments at that sum), contending that shippers had no right to ice the bunkers. They also insisted that the $7.50 rate was confiscatory, and did not equal the $17.50, which the Commission itself had found to be the actual cost of services rendered in connection with pre-cooled shipments. The carriers thereupon prayed that both orders should be annulled and set aside.
The Commerce Court (204 F. 647) adopted the finding of the Commission that in pre-cooled shipments the revenue was $54 greater than in the railroad's method of refrigeration, and concluded by saying that, in view of that fact, "we do not think that the petitioners have any valid complaint to make of the charge of $7.50 per car, established by the Commission." It further held that, under the facts appearing in the record, the shipper had the right to furnish the ice in pre-cooled shipments, and thereupon it dismissed the petition. The case was then brought here by appeal.
MR. JUSTICE LAMAR, after making the foregoing statement of facts, delivered the opinion of the Court.
There are many cases between shipper and carrier in which each insists that the other is bound to furnish service or facilities connected with the transportation of freight. The present record, however, presents an instance where both parties are contending for the privilege of supplying an article needed in the proper shipment of fruit -- the consignor claiming that icing is a necessary part of the loading, which he is authorized to supply; while the carriers insist that icing is a part of refrigeration, by statute made transportation, which they are bound to provide and for which they are entitled to collect reasonable compensation. The determination of these conflicting
claims necessitates an examination of the two methods under which, in warm weather, oranges are shipped from California to the East.
In what is called standard refrigeration, the boxes, of the aggregate weight of 27,200 pounds, are so placed as to leave spaces between them wide enough to admit of a free circulation of air chilled by ice in the bunkers. Subsequently, the carriers put in a system of pre-cooling under which, after the cars had been loaded, they were taken from the point of shipment to refrigerating plants owned by the carriers, where whole trainloads are pre-cooled at one time by means of blasts of very cold air driven into the car through and around the boxes. At the end of three or four hours, the fruit is sufficiently chilled, the bunkers are then filled with about 10 tons of ice, furnished by the carrier, and the train is started on its journey to the East, the bunkers being reiced from time to time as needed at stations along the route. For this entire service, the Commission held that the carrier's charge of $62.50 was reasonable.
A different method obtains where the icing of the car is done by the shipper at his own expense. In that class of cases, the oranges are taken from the grove directly to a cold room having a temperature of about 33Ä„ F. There, the boxes are allowed to remain for periods of from twenty-four to forty-eight hours, and until the fruit is chilled to the center. When thus pre-cooled, the boxes are ready for shipment. A refrigerator car is then placed on the track opposite the door of the cold room of the warehouse with which it is connected by a collapsible enclosed passageway, so arranged as to exclude the outside air, while at the same time allowing that from the cold room to enter and cool the interior of the car. Through this passageway the oranges are trucked from the warehouse to the car, and, as they have been chilled to the center, the boxes are packed close together, forming a solid mass weighing
33,000 lbs., with a temperature of about 35 F. The doors and vents of the car are promptly and tightly closed, the bunkers are immediately filled with unusually large cakes of ice, in order to reduce the rate of melting, and the fruit is then forwarded under a filed tariff which provides that reicing is unnecessary, and that the shipper will make no claim for damage occasioned by failure to reice in transit. For their services in connection with such pre-cooled shipments, the carriers were allowed to charge $7.50, but the Commission refused to permit them to charge for the ice needed to keep the fruit cool between warehouse and destination.
1. This ruling is attacked by the appellants, who contend that icing is a part of refrigeration, which § 1 of the Hepburn bill [ Footnote 1 ] makes a part of the transportation they are bound to furnish upon reasonable request. They insist that in order to meet the duty thus imposed by statute, they have been compelled at great expense to erect immense plants where trainloads of fruit can be cooled, and where an enormous quantity of ice is manufactured for refrigeration purposes. They argue that, being bound to furnish all necessary icing and reicing, and having at great cost prepared to furnish the supply, it is not only just, but a right given by statute, that they should be allowed to provide all needed icing or refrigeration at a rate to be approved by the Commission.
Whatever transportation service or facility the law requires the carrier to supply they, have the right to furnish. They can therefore use their own cars, and cannot be compelled to accept those tendered by the shipper on
condition that a lower freight rate be charged. So too, they can furnish all the ice needed in refrigeration, for this is not only a duty and a right under § 1 of the Hepburn bill, but an economic necessity, due to the fact that the carriers cannot be expected to prepare to meet the demand, and then let the use of their plants depend upon haphazard calls under which refrigeration can be demanded by all shippers at one time and by only a few at another.
This contention was sustained by the Commission, which recognized that
"the shipper has no right to provide refrigeration himself today and call upon the railroad company for that service tomorrow. To permit such a course is to demoralize the service of the defendants, and to prevent them from discharging their duty with economy and efficiency. . . . It is the duty of the carrier to furnish refrigeration upon reasonable demand, and insofar as the furnishing of that refrigeration is a part of the service rendered by the carrier, the carrier may insist upon its right to furnish that service exclusively."
2. But, of course, this does not mean, that, because the carriers have ice on hand, they can compel the shipper to have his fruit refrigerated when, on account of the state of the weather or for other cause, he prefers to have it forwarded under ventilation only. When, however, ice is actually needed and is actually used, the question arises as to whether icing is a part of preparation which can be done by the shipper, or a part of refrigeration (transportation) which, by statute, the carrier has the exclusive right to furnish.
To this question, no answer can be given that will apply in all cases. For in the shipment of fruit, as in that of other articles, it is impossible to lay down a rule which definitely fixed what loading includes and by whom it must be done. Nor is there any consistent practice on this subject, since, from reported cases, it appears that the
claims of the parties are based rather on interest than on some definite principle. Sometimes the shipper, as here, insists on the right to load and provide necessary appliances. At other times, he demands that such service and appliances be furnished by the railroad company. Conversely, the carriers sometimes claim, as here, the right to furnish service and facilities, while in other cases insisting that one or both must be supplied by the consignor. Cf. National Wholesale Lumber Dealers' Asso. v. Atlantic Coast Line R. Co. 14 I.C.C. 154; Schultz v. Southern Pacific, 18 I.C.C. 234; In re Allowance for Lining and Heating of Cars, 26 I.C.C. 681, 25 I.C.C. 497.
These inconsistent and conflicting demands serve to emphasize the fact that, before the haul actually begins, the right or duty of each party, where not absolutely fixed by statute, must be decided with reference to the special facts of each case.
As a general rule, the carrier loads all freight tendered in less than carload lots, while the consignor loads in all cases where, for his convenience, the car is placed at his warehouse or on public team tracks. This practice has grown up not only because the work can be more satisfactorily performed by the owner, but also because it is impossible for railroad companies economically to load cars at private warehouses or on those tracks where vehicles of the consignor or consignee come and go at the direction of the owner. 25 I.C.C. 490.
3. But loading may involve more than the mere placing of the freight on the car, since the character of the shipment may be such as to require the furnishing and placing of stakes, racks, blocks, and binders needed to make the transportation safe; or, the freight may be such as to require special covering, packing, icing, or heating, in order to preserve the merchandise in condition fit for use at the end of the journey. Who is to furnish these needed facilities may be quite as uncertain as who is to place the
freight on the car, and can only be determined by considering the character of the shipment, the place where the loading begins, and who can most economically perform the service required.
Neither party has a right to insist upon a wasteful or expensive service for which the consumer must ultimately pay. The interest of the public is to be considered, as well as that of shippers and carriers -- their rights, in turn, having been adjusted by a reduction in the rate if the loading is done in whole or in part by the shipper, and by an increase in the rate where the loading is done in whole or in part by the carrier. But, by whomsoever done, the loading must be such as to fit the freight for shipment, and when -- by statutory requirement, by valid order of the Commission, or by the carriers' voluntary act -- the car is placed at the consignor's warehouse to be loaded by the shipper, he may not only put the freight on the car, but may do all other acts required to fit the freight for its proper shipment, at least until, under a tariff regularly filed, the carrier offers to do what is necessary to secure or preserve what has thus been placed on its car for transportation. The refrigeration and pre-cooling offered by the carrier to shippers of pre-cooled fruit were found not to be the equivalent of the method adopted by the shipper.
4. In the present case, the carriers concede that in pre-cooling shipments the consignor had the right to take all of the steps for preparation except the last. They concede that he had the right to pre-cool the fruit, to pre-cool the car, to place the boxes on board the car, to stop the vents, and seal the doors. But they deny that he could ice the bunkers, even though that was necessary to the complete preparation, or loading, needed in that particular class of shipments, and without which the fruit would be damaged by the rise in temperature occurring during the time the car is being hauled from the warehouse of the shipper to the icing station of the carrier. Such delay in
filling bunkers would nullify most of the advantage of the expensive chilling of fruit and car necessary in the pre-cooling shipments -- permitted, if not originally encouraged, by the carrier. The privilege was withdrawn not because the railroad companies were in position to furnish the ice at the proper time and place, but solely because the Commission had reduced the carriers' charge on pre-cooled oranges from $30 to $7.50 per car.
The icing may have been so related to refrigeration as to authorize the carriers to render that service. But manifestly they could not be expected to build refrigerating plants near each warehouse; and, the carrier not being in a position to do such icing, the consignor had the same right to provide the necessary supply that he would have had to ice a shipment of fish, to furnish and place standards to secure lumber on an open car, or to fasten to the floor articles which otherwise might be damaged by the jerks and jolts of a moving train. In the absence, therefore, of the carriers' offer, under a filed tariff, to furnish ice at the time and place needed in pre-cooled shipments, or to substitute a service of equal value at practically the same cost, they had no right to prevent the consignor from filling the bunkers so as to fit the freight for proper transportation.
5. The tariffs, withdrawing the pre-cooling privilege after July, 1911, would have changed the practice, recognized by the carriers themselves and actually approved by the Commission's order fixing $7.50 for the carrier's services in connection with such practice. As the withdrawal "affected a practice and a rate," the Commission had power to cancel that tariff and to require the carriers to conform to the order establishing the $7.50 charge in pre-cooled shipments. Such an order was justified by the provisions of the Hepburn Act (34 Stat. 589), which authorizes the Commission, after a hearing, to determine whether rates, or practices affecting rates, are unreasonable, to determine what practice in respect to transportation
is just, and to require the carrier to conform to those prescribed by the Commission. [ Footnote 2 ]
6. The appellants insist, however, that, even if the shippers are entitled to furnish the ice, the carriers are entitled to pay for hauling it. They claim that the charge of $7.50 is confiscatory because it does not cover what the Commission found to be the actual cost of the carriers' pre-cooling service. They point to the fact that the rate of $1.15 per cwt. on oranges was found to be reasonable without regard to the character of the shipment, and whether the fruit moved under ventilation, standard refrigeration, or pre-cooling shipment -- additional sums being allowed for furnishing or hauling ice needed in transportation of the fruit. They admit that more revenue is derived from a carload of pre-cooled fruit, weighing 33,000 lbs., than from a car where the load weighs 27,200, but insist that the greater revenue is because of a greater service rendered and a greater weight hauled. On the authority of Interstate Commerce Commission v. Stickney, 215 U. S. 98 , 215 U. S. 105 , they contend that the receipt of a fair return for carrying 33,000 lbs. of fruit affords no reason for compelling them to haul 5,000 lbs. of ice 2,000 miles for nothing when, as found by the Commission, the actual cost of the haul is $12.50.
The order does not show the items going to make up the $7.50 charge. In the brief for the Commission, it was
said to include $5 for damage to the bunkers and $2.50 for profit. And since the report shows that the carriers were also entitled to $12.50 for hauling the ice, a charge of only $7.50 for a $20 service would at first blush appear to be not only unreasonable, but confiscatory. But the order is to be read in connection with the report of which it forms a part. When so read, it is evident that the Commission did not intend to require the carriers to haul 5,000 1bs. of ice without reasonable compensation, but considered that the haul of the ice was so much a part of the haul of the pre-cooled freight that the expense could properly be treated as included or absorbed in the rate on the fruit itself. Cf. Farrar Co. v. N.C. & St.L., 25 I.C.C. 25; Swift & Co. v. M. P. Ry. Co., 22 I.C.C. 385.
The cost of such haul was $12.50 -- equivalent to 3.8 on the 33,000 lbs. of oranges in a pre-cooled shipment, and, as a mere matter of figures, it was immaterial to the carriers whether they were permitted to charge $1.11.2 on the fruit and $12.50 for the ice, or $1.15 on the fruit alone, without any distinct charge for transporting the ice. In either event, the revenue received was more than that derived from a car of standard refrigeration, without corresponding increase of cost.
7. The claim that the order modifies the established rate of $1.15, and reduces it to $1.11.2 in pre-cooled shipments, thereby discriminating against the small fruit grower and those who forward under ventilation, or under the carriers' method of refrigeration, is not an issue presented by any assignment of error in this record, even if the carriers were in position to make such a contention. Int. Com. Comm. v. Chicago, Rock Island & Pac. Ry., 218 U. S. 88 , 218 U. S. 109 . There is no claim in this case that such rate, thus distributed, is unreasonable.
8. What is a proper rate on fruit in pre-cooling shipments, or a fair charge for hauling necessary ice or rendering other transportation services, are all ratemaking
matters committed to the Commission. It may determine what shall be the difference in rate between carload and less than carload lots; it may decide whether the difference in revenue, due to a difference in method of loading, warrants a difference in the rate on carload shipments of the same article. It may prescribe the form in which schedules shall be prepared and arranged (§ 6), and may approve tariffs stating that the single rate includes both the line haul and accessorial services absorbed in the rate. Conversely, it may prescribe a tariff fixing a through rate which includes not only the haul of the fruit, but the haul of the ice necessary to keep the fruit in condition. All these are matters committed to the decision of the administrative body, which, in each instance, is required to fix reasonable rates and establish reasonable practices. The courts have not been vested with any such power. They cannot make rates. They cannot interfere with rates fixed or practices established by the Commission unless it is made plainly to appear that those ordered are void. Int. Com. Comm. v. Union Pacific R. Co., 222 U. S. 547 . No such showing is made in this case. The decree must therefore be
[ Footnote 1 ]
". . . The term 'transportation' shall include . . . all services in connection with the receipt, delivery, . . . ventilation, refrigeration, or icing . . . of property transported, and it shall be the duty of every carrier . . . to provide and furnish such transportation upon reasonable request therefor."
34 Stat. 584, c. 3591.
[ Footnote 2 ]
"Sec. 15. The Commission is authorized . . . whenever, after full hearing . . . it shall be of the opinion that any of the rates or charges . . . for the transportation of persons or property . . . or that any regulations or practices . . . affecting such rates are unjust or unreasonable . . . to determine and prescribe what will be the just and reasonable rate . . . and what regulation or practice in respect to such transportation is just, fair, and reasonable to be thereafter followed, and to make an order that the carrier shall cease and desist from such violation, . . . and shall conform to the regulation or practice so prescribed."